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Credit rating bureaus target EAC expansion

Metropol Credit Bureau managing director Sam Omukoko. Photo/File
Metropol Credit Bureau managing director Sam Omukoko. Photo/File  

Kenyan credit rating bureaus are preparing to follow in the footsteps of domestic banks by spreading wings to the rest of East Africa, just over four years after they were licensed by the Central Bank of Kenya (CBK).

Metropol Credit Bureau has invested Sh500 million in regional expansion and capacity development as it prepares to take advantage of the widened scope of credit information sharing with change of law and cooperation among East African Community (EAC) states.

Increasing capacity

The other licensed credit bureau in the country, American-owned TransUnion which bought into CRB Africa, is also said to be investing more in capacity development in anticipation of the same opportunities.

“We are investing in regional expansion and capacity to ensure we accommodate the inclusion of positive data from banks, Saccos and deposit-taking microfinance because the current law has the scope of people who can approach the bureaus,” said Sam Omukoko, the CEO of Metropol Credit Bureau.

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He said the firm was awaiting regulatory approval to open in Uganda. Other countries it intends to venture into are Rwanda and Tanzania.

Uganda opened up its credit bureau market last year, having given South African Compuscan CRB exclusivity for three years since 2008 as it considered the market too small for many players.

Tanzania licensed its first credit bureau, Dun & Bradstreet, while Rwanda opened the market in 2010 with CRB Africa already operating there.

Plans are in place to allow sharing of credit information across the region following expansion of banks and business across EAC.

“The bureaus would want to build a regional infrastructure given that EAC provides an opportunity and business scale desired.
However, this is driven through regulators; there was a regional conference last year in which the regulators agreed legal framework to facilitate credit sharing to be set up,” said Wachira Ndege the chairman of East Africa Credit Bureaus Association.

Bankers have also called for the bureaus to share information across borders to ensure defaulters do not take advantage of the regional business to borrow in countries where they are not listed, negating the system.

Following easing of doing business across the East African borders, most business have a regional footprint, creating need for close monitoring to ensure the businesses do not to borrow from different lenders across borders and in the process overburden themselves with debt.

The Kenyan bureaus are expected to start sharing information in the next three months necessitating the need for increased capacity.

Currently the bureaus only hold 4.5 per cent of the industry information, which constitutes non-performing loans. Information on good debt is expected to flow in with the change in law.

Sharing information

The legislation was also reviewed to have deposit-taking microfinance institutions and licensed Saccos share information on defaulters.

With total disclosure of credit information in the country, the bureaus will be expected to profile borrowers depending on their level of debt, ability to repay and promptness in settling obligations.

The sharing of positive information will allow potential borrowers to use their profiles to bargain for softer terms of credit, which include lower interest rates and zero collateral.

Last year during a presentation in the diaspora on the investment opportunities available in Kenya’s financial sector, CBK governor had identified need for more rating companies to promote competition and enhance quality of reports.

The bulking up of the credit bureaus would also be in anticipation of expected competition from abroad.

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